Did you receive a trust fund in the form of your inheritance ? If so, it is important that you know the specifications of the trust fund.

 

The person that set up the trust fund may have put limitations: how old you are when you receive the money, what the money can be used for, etc.

 

Many people set up trust funds for children and grandchildren to establish a financial future for the individual (protecting the assets of the beneficiary). This also eliminates some taxes due on their estates when they are deceased. There are two different types of trust funds that are typically used:

 

After-Death (or testamentary)
This particular type of trust fund typically comes in the form of a will.

 

Living (or inter vivos)
This trust is established while the person setting it up is still alive. Living trusts can be revocable or irrevocable. Revocable trusts are subject to federal and state taxes, whereas irrevocable trusts, in most cases, are not.

 

Are you wondering if you will owe the IRS tax on your trust fund? There are several tax advantages to receiving a trust fund. There are provisions that can be set up in a trust that will allow the receiver to be exempt from the annual gift tax.

 

There are two provisions that the IRS will accept: an age limit for the minor and annual payments to the minor. Other tax advantages include income and estate tax breaks; these tax breaks vary from state to state.

 

For more information and answers to all your tax-related questions visit TurboTax Online today. Learn more about Tax on Inheritance Trust Funds.

States that currently collect a tax on inherited estate money or property are Connecticut, Maryland, Massachusetts, New Jersey, Nebraska, Pennsylvania, Oregon, New York, Indiana, Kansas, Louisiana, Kentucky, and Iowa.